ARE Newsletter August 2016: Clean Energy Innovative Business Models

Editorial

ARE partners with ADB on ‘Energy for All’ initiative to path the way for global implementation of clean energy business models

By Marcus Wiemann, Executive Director, ARE

Business interest in the off-grid sector is increasing at an impressive rate, as exemplified by the explosive increase of about 37% in ARE newsletter subscribers and 28 % increase in ARE membership, since the end of last year. Put in other words, ARE has received one new member per week on average since start of 2016.

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Business interest in the off-grid sector is increasing at an impressive rate, as exemplified by the explosive increase of about 37% in ARE newsletter subscribers and 28 % increase in ARE membership, since the end of last year. Put in other words, ARE has received one new member per week on average since start of 2016. We see this is as a great motivation to further advance the various lines of ARE services for improved sector development and more importantly to assist individual companies to enter into business engagements with the overall objective to enable energy access for rural people in low- and medium income countries.

To increase the quantity and quality of projects and to achieve the most-effective utilisation of scarce resources, it is paramount to identify the best models and technical solutions already available on the market. In order to step up the learning curve more quickly and to avoid duplication of efforts and experiences made in the past, we therefore invite you to make use of the ARE Matchmaking Platform, ARE Job Platform and as a new service, the ARE Rural Electrification Training. With this vast range of supporting services, ARE provides a strong foundation to bring more practitioners, professionals and newcomers into the situation to scale the off-grid markets based on self-sustainable renewable energy business models.

To further internationalise ARE engagements, the Alliance has been very active in the Asia-Pacific region over the summer. As a first step, we are very happy to announce that ARE has been accepted as a partner of ADB Energy for All Initiative. The aim of this cooperation is the shaping of future market developments and the exchange about latest innovations and business models and more importantly to facilitate ADB financial and technical support for new projects in the pipeline. Please feel free to contact me personally in case of interest to get engaged.

Finally, let’s have a closer look at what will be highly important in Africa this autumn! From 29 Sept – 2 Oct ARE will support a series of events before and around IOREC in Nairobi, ranging from match-making to exhibition and conference as well as a site visit to an off-grid project. We look forward to seeing you in Nairobi.

Happy reading, Marcus Wiemann

Guest Editorial

Energy for All Partnership – Transforming lives for the better

Energy transforms lives for the better. It can enable livelihood opportunities and provide power for small applications such as water pumps, grain mills, etc. Electricity can enable children to study at night and extend the availability of health services during nighttime. The use of modern fuels can improve health as these can displace traditional fuels which pose a great health risk on the users. Further, modern energy frees women from spending long time in gathering fuelwood and other biomass wastes thereby enabling them to engage in more productive and income generating activities.

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Energy transforms lives for the better. It can enable livelihood opportunities and provide power for small applications such as water pumps, grain mills, etc. Electricity can enable children to study at night and extend the availability of health services during nighttime. The use of modern fuels can improve health as these can displace traditional fuels which pose a great health risk on the users. Further, modern energy frees women from spending long time in gathering fuelwood and other biomass wastes thereby enabling them to engage in more productive and income generating activities.

However, majority of the people in the Asia-Pacific region face the challenge of energy poverty. Out of the 3.8 billion total population in the region, about 2 billion people still rely on burning solid fuels and 426 million people still have no access to basic electricity services.

As a response, the Asian Development Bank (ADB) established the Energy for All Initiative in 2008 to empower the region’s poor through greater access to energy. Energy for All supports ADB’s own operations and increase ADB’s investment in access to energy projects. ADB’s focus on energy access was formalized in 2009 with its latest Energy Policy that made “maximizing access to energy for all, especially the rural poor” a priority for ADB’s work in the energy sector.

Since the Initiative was launched, ADB’s total investments from 2008 to 2015 total to $6.24 billion. The investment is expected to provide energy access to more than 104.5 million people in the region.

ADB realizes that ensuring energy access to the majority of the people cannot be addressed by any single organization. For ADB, forging Partnerships with diverse groups or organizations is critical to address the challenges of energy poverty. In 2009, the ADB-led Energy for All (E4ALL) Partnership was launched to serve as a multi-stakeholder network designed to reduce energy poverty and scale up energy access in the Asia-Pacific region. The Partnership has a number of factors that make it different from other Partnerships addressing pro-poor energy solutions. It brings together multiple stakeholders for a common purpose and provides a platform for public and private sector agencies to pool resources and identify opportunities to achieve impacts more efficiently. It is not technology specific as it embraces all clean and viable energy solutions for scaling up successful and viable pro-poor projects and approaches.

To date, the Partnership through the contribution of members has already reached its target of providing energy access to 100 million people in Asia and the Pacific region by 2015. Around 125 million people have been provided with energy access through grid extension, provision of individual systems or mini-grids as well as through the provision of modern cooking and heating facilities. The Partnership is now working with a new target of providing additional 200 million people with energy access by 2020.

A recent example of a successful project implemented through the Partnership is a solar mini-grid project in a remote island in the Philippines. Details of this project will be featured in this newsletter.

The Alliance for Rural Electrification (ARE) has just joined the E4ALL Partnership. With its participation and given its broad network of partners in rural electrification, we are looking forward to collaborating closely to further increase energy access in the region.

New governmental role for rural electrification

The editorial is a personal view and does not have to reflect the vision of the European Commission.

Access to modern forms of energy is now accepted as a necessity of life. SE4ALL, the SDG’s - all put access to energy on the table. With that comes the responsibility for governments to work on this issue for the benefit of the people in their countries. The question is then what they can do best?

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The editorial is a personal view and does not have to reflect the vision of the European Commission.

Access to modern forms of energy is now accepted as a necessity of life. SE4ALL, the SDG’s - all put access to energy on the table. With that comes the responsibility for governments to work on this issue for the benefit of the people in their countries.

The question is then what they can do best? The classical route would be to extend the grid. But including generation and transport, the costs are approximate € 2,500 per connection. And that is far too expensive for governments or the donor community considering the number of households that are in need. So a new strategy has to be developed.

The solutions are coming from the private sector, and are already available with off-grid business models and technologies. Evidence is given by the call for proposal from ElectriFI which was ten times over signed implying multi billions of investments opportunities.

Then again there is a need to be careful that the countries in question do not fall into the regret that ‘Northern’ countries now have on their neo-liberal models of the last decades, in which responsibilities for public tasks were shifted too much to the private sector. Strong regulation looking after the interest of the end clients seem to be an important cornerstone here. For example, striking the right balance for the allowed electricity price, high enough to attract investors but low enough for mostly low income clients to be affordable.

Protection from too high electricity prices can also achieved by other effective ways than regulation such as by de-risking investors. If for example the government can make it easier or less risky for a private sector player to invest, the requested and necessary margin can be significantly lower which again will lead to lower electricity prices for producers and consumers. To give this assistance to companies is possible with one-stop shops which provide for easy to follow licencing procedures and information on regulation and contacts. But to increase interest from investors it will be of great added value if the Rural Electrification Agencies (REA) would start gathering and distributing information on where interesting markets are.

By gathering information per village how many people and companies are present, what their load requests are and how e.g. ground ownership is organised, the REAs could make pre-feasibility studies. Gathering project information is time consuming and costly, and by its nature very early in the project life cycle and so risk bearing activity. Especially for foreign companies. However, for a local public body is looks like a much more simple task to fulfil. Such market information can then be published so that the private sector can see where the interesting options are.

It is suggested to coordinate this exercise by close exchange between public and private sector, where the result at the end is a pre-feasibility information template, that the REAs can fill on behalf of the villages and regions in need of electricity. The donor community could train the REA’s to carry out the work independently, and also to provide risk capital like the European Commission’s ElectriFI and maybe funding for the public infrastructure like the network of the mini-grid. The sectoral organisations like ARE then can publish these pre-feasibility studies to their members in order to attract the developers.

This would be a modern way for a government to take on its responsibility, while at the same time making most of the willingness to invest from the private sector.

In Focus: Pico & Small Scale Innovation

Innovative finance for solar business models to power local businesses in emerging markets

By Markus Schwaninger, Co-founder, ecoligo

In emerging markets, financing gaps prevent viable solar projects from being realised. ecoligo is a crowdinvesting platform that is bridging this gap, bringing clean, cheap and reliable energy to local businesses and industries, while offering profitable and sustainable investments to the crowd.

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By Markus Schwaninger, Co-founder, ecoligo

In emerging markets, financing gaps prevent viable solar projects from being realised. ecoligo is a crowdinvesting platform that is bridging this gap, bringing clean, cheap and reliable energy to local businesses and industries, while offering profitable and sustainable investments to the crowd.

Earlier this year, a study of over 500 CEOs showed that rising electricity costs is the number one threat facing industry in Ghana (Association of Ghana Industries, 2016). Unreliable power supply ranked second. The issue is not unique to the country, but is experienced by local businesses across many developing countries. In terms of solar energy, this is a paradox: why should countries rich in solar radiation be relying on expensive, unreliable and polluting sources for their energy? The answer lies in financing: building systems to harness solar power is capital intensive, and currently no suitable financing options for commercial scale solar power plants exist.

ecoligo provides a solution. Capital is raised through the online platform at www.ecoligo.com by offering attractive and tangible projects to a crowd of private investors. By doing so, ecoligo finances business models such as Power Purchase Agreements (PPAs) or Leasing/Rent-to-own, which saves customers up to 40% on their energy expenditure.

Repayments are typically made over a period of around 5 years as an annuity; the technical and financial details are adapted to the needs of each client, allowing them to access solar energy in a suitable way. The use of battery systems is assessed on an individual basis depending on the client’s needs and current electricity supply. Once financed, ecoligo’s partners manage the construction and maintenance of the solar system. The performance of the solar system is remotely monitored.

ecoligo is currently structuring financing for photovoltaic systems with sizes from 20 kWp to 1,000 kWp to supply farms, manufacturing industries and lodges - mainly in Ghana, Kenya and Tanzania, but not limited to these countries. Crowdinvestors receive an attractive return of at least 5% for their sustainable investment.

Get in contact if you are developing solar projects to assess financing and asset management options.

If you want to become part of ecoligo’s crowd and make investments that matter, sign up to the newsletter now to be the first to know about new investment opportunities.

Building business models with women makes sense

By Katarina Uherova Hasbani,ARE Board Member & Business Development at Revelle Group

Involving women as entrepreneurs or clients of energy access businesses improves their commercial viability. The off-grid rural electrification industry is progressively moving away from reliance on donor funding towards commercial finance. Viable business models increase bankability of projects with commercial lenders. Revelle Group gathered examples which demonstrate that women can play central role in making your energy access project more sustainable over time.

Involving women as entrepreneurs or clients of energy access businesses improves their commercial viability. The off-grid rural electrification industry is progressively moving away from reliance on donor funding towards commercial finance. Viable business models increase bankability of projects with commercial lenders. Revelle Group gathered examples which demonstrate that women can play central role in making your energy access project more sustainable over time.

Data is already available to prove that involvement of women in energy access projects generates economic value. Arc Finance, which develops solutions for access to finance for clean energy, reports that microfinance organizations providing loans to women clients have100% repayment rates. Microfinance research demonstrates that the risk of non-payment is likely to be lower for women entrepreneurs. Women are likely to know better their women clients and their ability to make regular payments. The Melinda & Bill Gates Foundation has recently pledged more than 80 million USD to research on women and their economic and social situations. More energy access information will come from there.

A number of businesses are already fully integrating women in their business models. Building pico and micro-grids in India that are paid for by the communities, MLinda, relies on women groups to generate additional income to make them affordable. MLinda loans to women groups for purchase of an electric rice-milling machine and trains them to maintain it and manage the business around it. Women earn monthly income, repay their loan and become natural advocates for clean energy in their community. SolarKiosk distributes its award-winning solar powered energy and connectivity distribution center through partnerships with local entrepreneurs who are preferably women. Solar Sister deliberately uses women-centered sales network to distribute its solar lighting solution in Africa.

Women have a measurable, positive impact on their community and can drive purchasing power growth. When securing additional income, women are more likely to reinvest in their community’s quality of living. Women entrepreneurs have the potential to lower acquisition and servicing costs. WPower Hub reported already in 2014 that women can demonstrate more than twice the business success than men. Other initiatives are also leveraging women’s strengths for energy access. UNEP and UN Women teamed up to launch “Women’s Entrepreneurship in Sustainable Energy Programme”. Energia is an international network which supports scaling up of women-focused energy businesses.

Women can energize the energy access movement. Involve them, cater for them. Why? Simple, it makes good business sense.

Revelle Group: a strong advocate for women’s roles in energy, is a consulting company providing sustainable energy services to public and private sector clients in developing countries and emerging economies.

Credits: MLinda

EEP support to innovative business models for solar PV

As a challenge fund, the Energy & Environment Partnership programme in Southern and Eastern Africa (EEP S&EA) provides grant funding to small and medium size companies, organisations and institutions working in the field of renewable energy and energy efficiency.

As a challenge fund, the Energy & Environment Partnership programme in Southern and Eastern Africa (EEP S&EA) provides grant funding to small and medium size companies, organisations and institutions working in the field of renewable energy and energy efficiency.

EEP is funded by Finland, the UK and Austria and is implemented by KPMG.

Through 13 Calls for Proposals, EEP has built a portfolio of over 200 projects that have received or are receiving co-funding for their implementation. Integrated into this core area of the programme are Knowledge Management and Business Development Support. All with the aim of catalysing market transformation towards creating a market for clean energy projects with development impacts.

Solar PV projects represent the largest share of projects in the EEP portfolio: 33% of all projects financed (68 projects) and 40% of EEP’s total project investment (€ 20M). The 68 solar PV projects are spread across 12 of the 13 EEP countries, with the bulk (73%) implemented in East Africa.

The EEP funded solar PV projects apply four key business models:

1) Over the counter sales (OTC) - While in the past solar PV products were typically sold as an additional product with limited contribution to the total business turnover, in recent times a large number of dedicated solar companies have emerged. These specialised companies are dependent on the development and implementation of effective marketing, supply and distribution models for their survival and success. EEP has supported companies like Barefoot Power, d.light (both Kenya) and Sollatek (Tanzania).

2) Fee-for-Service model - This is an approach based on customers paying a monthly fee for electricity services, similar to a utility model, however based on stand-alone systems. Significant upfront costs have to be borne by the business and the payback period is relatively long. Foundation Rural Energy Services in Uganda and Off Grid Electric in Tanzania are examples of EEP funded projects that have applied this model.

3) P.A.Y.G – This is effectively a consumer financing model for solar PV systems that relies on remote monitoring and control of solar systems, enabling remote disconnection of systems in the event of default. Eventually ownership of the system is transferred to the customer. The long repayment periods typically create significant cash flow burden for businesses. Basecamp Foundation Kenya, Mobisol (Tanzania) and DASSY Enterprise (Rwanda) are some projects that have implemented this model.

ADB: Empowering the People: Cobrador Island Solar Hybrid Project

In March of this year, a team from the Asian Development Bank (ADB) traveled from our Headquarters in Manila to the Philippine province of Romblon to inaugurate a hybrid solar-diesel project set up to provide 24/7 electricity to a fishing community on the island of Cobrador.

In March of this year, a team from the Asian Development Bank (ADB) traveled from our Headquarters in Manila to the Philippine province of Romblon to inaugurate a hybrid solar-diesel project set up to provide 24/7 electricity to a fishing community on the island of Cobrador.

Bringing modern energy, namely electricity, to small island communities is a challenge that has perplexed governments and development organizations alike. The issues facing rural electrification, such as the affordability of extending the electrical grid over difficult terrain to reach a scattered and low density population is even so magnified when it comes to small island communities. The Philippines faces exactly this situation. Most small islands are powered by small diesel-fueled generating sets that provide electricity service for only 4 to 12 hours per day. The low power demand and capacity to pay against the high cost of delivering diesel fuel to and maintaining small-scale diesel power plants in these islands do not economically justify 24-hour operations.

As a response, ADB and our partners - the Korea Energy Agency, the Government of the Philippines-owned National Electrification Administration, and the Romblon Electric Cooperative– initiated the development of hybrid mini-grid system to retrofit the diesel genset in Cobrador Island, Romblon Province with renewable energy. This option enables the existing mini-grid to supply 24-hour electricity service and at the same time reduce the cost spent on expensive fossil fuel. The mini-grid system in the island combines a 30 kilowatt (kW) solar photovoltaic (PV) installation, 180 kWh lithium-ion batteries for storage, and 15-kW diesel generator with a power control system to allow automatic switching between the two.

To reach Cobrador, the system’s main components – solar panels, lithium-ion batteries, controller systems – had to make long trips from the Philippine mainland, with the last leg done by pump boat over the waters of the Romblon Pass to reach Cobrador, which has no formal port or jetty. Logistical difficulties like these have kept electricity from small islands and rural communities over the decades, even as electrification rates have risen overall across Asia and the Pacific.

The Cobrador project is favorable for several reasons. The first is the direct benefit it provides to the community, a 24-hour supply of cleaner and more affordable electricity that supplies all 244 homes in the island, including the community’s health center and school. It supports local industries, like fishing and artisanal marble processing, thereby enhancing livelihood and income generation. Second, it demonstrates the financial and economic viability of mini-grid systems for off-grid electrification for organizations working on energy, public or private alike. Renewable focused mini-grid systems can provide energy on-site for many communities which the national grid cannot reach. As renewable technologies have matured, this solution has become much more popular, viable, and effective. The Philippines being an archipelago has numerous remote and isolated islands where the success of Cobrador Solar Hybrid Project can be replicated.

Maximizing energy access for the poor is one of the pillars of ADB’s energy policy as it works in the developing countries of Asia and the Pacific. It not only improves human lives, it also enables the spectrum of human development – education, new opportunities for employment, health care and more. Through our Energy for All Initiative, we have worked to increase ADB’s ability to identify and support more projects that bring modern energy to the poor.

The people of Cobrador have also spoken of the impact of the project in this short documentary ADB commissioned. It can be viewed here: https://youtu.be/ygkJAIWJsBE

News from the Alliance

ARE has joined Energy for All as a regular member (3 Aug)

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To promote energy access in Asia ARE has joined the Asian Development Bank (ADB) initiative: Energy for All as a regular member. In addition to raising the sector’s visibility by event cooperations it is the common objective of this first Asia focused high-level partnership of ARE assist the private sector to establish RET solutions in the region by means of knowledge sharing, promotion of business models, and early stage project development support.

Energy for All was formed specifically to build platforms for cooperation, exchange, innovation, and project development to solve the issue of energy poverty. Energy for All brings together key stakeholders from business, finance, government, and NGOs for a singular purpose: to drive action.

The Myanmar Green Energy Summit, where ARE was represented by Board Member, Katarina Uherova Hasbani (Revelle Group), brought together 150+ stakeholders such as international donors (e.g. GIZ, Heinroch Boll Foundation, IFC, World Bank WWF,), government officials and industry

The event was very useful in increasing the understanding of the national electrification program from 2015. To address the 70% rural electrification of Myanmar earlier calls for proposals covered both solar home systems and mini-grids. With energy access standing at 30%, there are many opportunities for off-grid projects. ARE investigates at present on how to best engage in the country. More information to follow soon.

Invitation: Pre-IOREC: B2B Off-grid Matchmaking (Nairobi, 29 Sep)

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ARE, in collaboration with the Africa-EU Renewable Energy Cooperation Programme (RECP), will host an Off-grid Matchmaking Event the day before IOREC on 29 September 2016 in Nairobi. The venue is the Pavilion room of the Safari Park Hotel, located Kasarani off Thika Road, P.O. Box 45038 - 00100 Nairobi, Kenya.

The event, which will feature structured B2B and B2Finance matchmaking sessions, aims for participants to network and identify business partners and financiers, as well as advancing existing projects at different stages of maturity. It will be complemented by opening remarks from a high-level speaker, and presentations on the business services offered by ARE and the RECP.

The B2B event will mainly target businesses and financiers from Africa and Europe working in mini-/off-grid renewable energy markets in Africa. Participants will be invited to specify what type of partners they are looking for through an online platform prior to the event.

There is no participation fee for this event but space is limited to 100 participants.

Invitation: IOREC III Exhibition (Nairobi, 30 Sep – 1 Oct)

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On 30 September - 1 October 2016, ARE will organise an exhibition to give the private and public sector an opportunity to showcase services, products and projects, and to offer participants networking opportunities. The exhibition will take place at Safari Park Hotel in Nairobi (Kenya) and will be organised in parallel with the third edition of IOREC, where already over 450 participants have registered.

WHY EXHIBIT?

The Exhibition organised by ARE allows participants to present their products, services and projects and to showcase the latest technologies and business solutions at the forefront of off-grid renewables. A stand and sponsorship equally enable exhibitors to raise their profile and to advance existing and new businesses by networking with local and international representatives from rural electrification agencies, private sector, financing institutions, development agencies and international organisations.

EXHIBITION STAND

Stand prices:

ARE members: 1,750 EUR

Non-ARE members: 2,500 EUR

Only a few spots are left, so do not miss out on your best opportunity to connect with the most influential group of off-grid professionals this year!

SPONSORSHIP

For prime visibility, ARE is offering sponsorship opportunities that fit different marketing budgets. Options include:

Strategic location and larger stand

Roll-up for display at entrance

Logo on our events page

Reach out to our +21,000 followers

For more information on how to book your stand and to get a quote on sponsorship, kindly consult our events page.

This high-level event is a joint initiative of the EU and CARIFORUM and is hosted by the European Commissioner for International Cooperation & Development Neven Mimica.

On the first day, the Prime Minister of Barbados His Excellency Freundel Stuart will lead the high-level representation from the Caribbean countries. The Conference will present:

Latest policy developments in the Caribbean that support increased investments in renewable energy and energy efficiency;

New financing instruments that help de-risk renewable investments, such as the new Electrification Financing Initiative ElectriFI;

Innovative technology showcase of solutions specifically designed for renewable energy on islands.

On the second day, the Business Opportunities Forum will highlight key areas of interest especially for the private sector in investing in renewable energy as well as energy efficiency. The Forum will include panel discussions, B2B meetings and an exhibition.

Invitation: Unlocking Solar Capital Africa (Nairobi, 1-2 Nov)

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Solarplaza’s 2-day conference and exhibition Unlocking Solar Capital Africawill take place in Nairobi from 1-2 November 2016. The event aims at unlocking capital for new solar project development in Africa, by connecting solar developers and financers active in the three leading solar electrification segments (on-grid solar, micro-grids, off-grid lighting and household electrification).

ARE’s members can register with the benefit of a 15% discount. Contact Jens Jaeger to get the discount code.

Enjoy over 15 hours of pure networking time: 2/3 of participants at Solarplaza’s conferences are C-level execs and senior directors.

Join a conference taking place in one of the key African hotspots, Nairobi, with one of the largest continental stock exchange markets and a myriad of local and international businesses headquartered in the city.

Trust Solarplaza 10+ year experience in delivering high-level networking and content events. This is the company’s 10th event on African soil, and the 80th worldwide.